Check your Loan Recall paperwork for the Isle of Man: it could matter

Contractors who have received demands for repayment of historic loans should take another look at their correspondence — and specifically check whether an Isle of Man company appears anywhere in the history of their loan.

Why?

Because our investigation has uncovered a potentially important distinction between a company making a loan in the first place and another company subsequently acquiring that debt — and questions about how Isle of Man rules applied to those different activities.

ContractorUK has now taken that question directly to the Isle of Man Financial Services Authority.

And its response suggests that the regulatory history of these loans deserves a closer look.

The FSA told us:

“Different legal and regulatory considerations may arise at different stages of a loan’s lifecycle.”

In particular, it said:

“The position of an originating lender may differ from that of a subsequent purchaser, administrator or debt collector depending on the structure and operation of the particular arrangement.”

What does this mean for you?

A company may have originally made the loan; another may subsequently have acquired a portfolio containing it; another may have administered it; and the demand landing on your doormat today may come from yet another business.

Our investigation is now examining what regulatory requirements applied when Isle of Man businesses acquired existing contractor loans rather than originating them themselves.

The FSA told ContractorUK that simply acquiring or owning a portfolio of loans would not necessarily require an FSA financial-services licence.

But — and this is the important bit — that doesn’t mean there were no other regulatory requirements.

The regulator told us:

“Particular activities connected with lending or debt administration may have engaged other legal or registration requirements, including under the Moneylenders Act 1991 or the Island’s AML/CFT framework.”

And responsibility for one particularly important piece of that puzzle doesn’t sit with the FSA at all.

It sits with the Isle of Man Office of Fair Trading.

The FSA explained:

“The OFT administers the Moneylenders Act 1991 and maintains the relevant register of moneylenders.”

ContractorUK has therefore approached the OFT as part of our investigation and is awaiting its substantive response.

So check your paperwork

For now, we’re asking affected contractors to do something very simple.

Check your loan correspondence and look for an Isle of Man connection. Don’t only check the company writing to you now.

The easiest clues include an address on the Isle of Man, references to IOM, Douglas or other Manx addresses, a website or email address ending in .im, or the name of an Isle of Man company in a loan agreement, assignment notice or subsequent demand.

Look backwards through the correspondence to see whether an Isle of Man company made, acquired, owned or administered the loan at an earlier stage.

If you can, jot the chain down:

Original lender → subsequent owner → administrator → current claimant

You don’t need to work out the legal consequences yourself.

At this stage, neither are we suggesting that finding an Isle of Man company means your debt is invalid or unenforceable.

Indeed, the FSA specifically cautioned us:

“An entity’s registration or regulatory status should not automatically be taken as determining wider questions concerning the ownership, validity or enforceability of any particular debt.”

Those are separate legal questions.

What the FSA has confirmed is that the regulatory position can depend upon what a company was actually doing, when it was doing it and where in the lifecycle of the loan it became involved.

And there is another complication where loans subsequently moved out of the Isle of Man.

The FSA told us:

“Where loan portfolios are sold or assigned to entities in another jurisdiction, a range of potential legal and regulatory considerations may arise, including those of the acquiring jurisdiction.”

What happens next?

ContractorUK is now trying to establish precisely what the Isle of Man’s moneylending and AML rules meant for businesses which acquired historic contractor loan portfolios — and whether those rules have any implications for contractors now receiving demands.